Is CRA in trouble over KPMG?

In a move you would expect to happen in other countries with a longer history of corruption and cronyism the CRA has come under fire for the handling of a scandal involving accounting firm KPMG. It would appear that the Freedom of Information Act requests for details by CBC on alleged scandal the have been stymied and delayed.

At the heart of the matter is the deal apparently made with KPMG clients who had been caught using an offshore tax dodge based on the Isle of Man. CBC had obtained documents earlier in the year that showed that clients were offered a sweetheart deal from the CRA whereby the guilty avoided making any restitution to the government as long as they never disclosed the details to the Canada public.
CBC in attempts to expand on the story and the meetings between officials from both KPMG the CRA and industry lobbyists have been met with a myriad of excuses and delays for documents requested under Freedom of information Act legislation. One request was met with a 360 day extension and others have been met with serious delays and missed deadlines with absolutely zero communication as to when the documents would be provided.

In one instance the CRA took a full eleven months to reveal a massive three pages of documents.   CBC suggest that other documents that have yet to be delivered seem to show a cozy and disturbing relationship between CRA officials and industry lobbyists including one set that suggests lobbyists worked to establish an “enhanced” relationship with CRA officials in order to change industry regulations. It appears that one particular meeting between industry officials and CRA management ended in an industry sponsored soiree at the very exclusive Rideau Club PAID for by the industry.

Another set of documents outlines the efforts to change and limit the powers of CRA Auditors by a senior industry lobbyist who happens to be a former senior policy advisor for the CRA. While the CRA is claiming that the request for information will be honoured and acknowledge that they have serious “information management and document retrieval problem when it comes to identifying and retrieving records in response to access requests”. The new Liberal regime has attempted to make the system more transparent by sending a “mandate” letter to all cabinet heads indicating that he expects greater transparency from all Government agencies.

Critics suggest that while this transparency is greatly needed it has yet to be implemented to any great degree. Critics are also calling for public hearings into the “scandal” of the offer of amnesty to the clients of KPMG in the tax shelter/dodge issue. At the very least we should all be very concerned that many major accounting firms seek to recruit former CRA enforcement officials into their firms after they have left the CRA. This certainly seems very similar to the system of the major banks in the U.S recruiting former SEC or Federal Reserve officials for their firms after leaving office and we all know how well that has worked out for the banking industry in the U.S.


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